Monday, July 1, 2013

Rodrik about growth, institutions, Krueger and much more

I very much recommend the last paper by Dani Rodrik, "The Past, Present, and Future of Economic Growth." He summarizes some of the ideas that he already presented in The Globalization Paradox, for example that to grow strongly in the short run it is not necessary to change all institutions, but that sound institutions are needed to consolidate growth and development in the long run. However, sound institutions are not easy to introduce and take time. He also argues that nation-states need breathing space to find their social consensus to make market economies acceptable, even if this means some reversal of globalization. To us Europeans this should be translated into trying to find the European consensus that makes the necessary integration more acceptable to everybody. But my preferred bit of the paper is the ironic reference (p. 31) to a speech by Anne Krueger, "Meant Well, Tried Little, Failed Much," which Rodrik believes is paradigmatic of the view of orthodox reform proponents that the to do list was designed to ensure that policy advisers would never be proved wrong. The advise of the orthodox was essentially that "if you want to become rich, you need to look like rich countries." It is difficult to avoid the feeling that this is precisely what those that recommend "institutional reform" as the great reforming idea have in mind.

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